When paying with a plastic card, shop owners often demand three per cent more for what they call as processing fees on the card. Else, you have the option of withdrawing money from the nearby ATM and completing the purchase using cash.
The policy of the government is to encourage electronic transactions and reduce the use of cash. The strategy was underlined by the central government during a cabinet meeting convened during the start of the year and for this, extra charges that were being levied on card transactions are being cancelled. The aim behind the move is to account for all transactions and reduce cash transactions that can often generate black money. The end result is that small transactions, such as those effected by consumer purchases, would not be charged extra fees.
The three per cent of total transactions that merchants charge extra is called surcharge. The same fee is also known in other aliases such as service charge, convenience fee etc. This the same charge that you would have to pay when you fill fuel at pumps. The same fee also applies when one books tickets at the Railway's online portal or when card payments are broken down into EMIs. Some card companies do away with surcharges if purchases are above a particular limit. Now, we can see that mostly it is small enterprises that charge a surcharge. Card companies have already done away with the fee.
As far as the shop owner is concerned, cards are not preferred because of the time involved in settling the bills. They have to maintain an account with banks and whenever the card is swiped, the money is deducted from the account. When the bills are settled, the money is credited back into the account. In most cases, the money that the bank credits back is minus charges. Further, as long as the credit gets delayed, overdraft fees have to be paid to the bank. All these increases overall costs for merchants.
When using cards, transactions become transparent and there is also less chances for forgery and therefore those who receive money from clients, such as doctors, beauticians and lawyers may have to install swiping machines in future to conclude transactions. Payments above Rs 50,000 have to be made using cheques and those above Rs 200,000 have to be settled using RGTS.
While credit and debit cards were the possessions of the rich, now they have become more commonplace and charges for each transaction have been done away with.